Which statement correctly differentiates centralized purchasing from decentralized purchasing and identifies which yields better supplier leverage?

• A. Centralized purchasing distributes purchasing to departments.
• B. Centralized purchasing consolidates orders through one department; yields better supplier leverage.
• C. Decentralized purchasing consolidates orders; yields better supplier leverage.
• D. Decentralized purchasing ensures uniform supplier terms.

Answer: (B)

The main idea is that supplier leverage grows when a buyer can present a larger, more predictable volume to suppliers. Centralized purchasing routes all orders through a single department, pulling together the needs of multiple units. This consolidation increases total spend with each supplier, enabling volume discounts, more favorable pricing, standardized terms, and a single, consistent negotiation point. It also improves supplier management and data visibility, making contracts easier to enforce and terms more uniform. In contrast, decentralized purchasing has each department placing its own orders, which fragments the total spend, weakens bargaining power, and leads to varied terms and less consistent supplier relationships. So, centralizing by consolidating orders through one department naturally yields better supplier leverage.